When it Rains, it Pours.

(7/31/2011) The Indonesian national carrier Garuda Indonesia is plagued by a host of problems: an IPO launch that fell far short of anticipated revenue targets; a depressed share price trading at more than 30% below the price pegged during the IPO; and industrial-relations problems with its pilots. Adding to the misery, news from the Jakarta Globe that for the first six months of 2011 Garuda has suffered a loss of Rp. 185.7 billion (US$21.9 million).

Compared to the same period just one year ago when Garuda earned a profit of Rp. 60.6 billion, the company's profits have declined by more than 400%.

The CEO of Gaurda, Emirsyah Satar, insists the loss incurred by his airline is less worhty of note than the fact that the Indonesian national carrier has managed to enhance revenues by 68.7% to Rp. 11.2 trillion
(US$1.27 billion) in the H1 of 2011.

Emirsyah blames the bad profit figures on rising operating costs, chiefly fuel and personnel. Said the Garuda CEO, “fuel remains a major uncertainty for us, but we managed to boost revenue.”

Fuels costs for the airline at Rp. 6.3 trillion have increased 165% in Q1 2011 as compared to Q1 2010. Meanwhile, administrative expenses, including wages, cost Rp. 920 billion in Q1 2011, an increase of 43.3% over the same period in 2010.

Emirsyah thinks the overall strength of the Indonesian economy and strong revenues expected during the coming Haj pilgrimage seasons will in time boost the airline’s profits.

Explained Emirsyah: “Generally, our strategy has not changed. We will keep investing in promoting sales and ticketing so that we can fill our seats, focusing on the domestic market by boosting frequency, expanding and rejuvenating our fleet, increasing the quantity and quality of our human resources and maintaining cost discipline.”

The finance director of Garuda, Elisaa Lumbantoruan, told the press that the airline is expanding its route network, increasing fares and focusing on business class to boost revenues to offset high fuels costs. As a cash-saving measure, Garuda has also cut back on its order for new aircraft for its budget subsidiary Citilink from 15 new aircraft to 10. The national carriers will, at the same time, and add 5 planes to its current fleet of 86 aircraft.